China offloaded 32.5 billion U.S. dollars worth of U.S. Treasury bonds (T-bonds) holdings in May but remained the largest holder of U.S. debt, U.S. Treasury Department reported last Friday.
China's holdings of U.S. T-bonds fell by 3.6 percent, or 32.5 billion U.S. dollars in May, to 867.7 billion U.S. dollars. This was the largest cut of the country's U.S. debt holdings.
Analysts believe that the offload is a wise choice as the U.S. Dollar Index soared in May.
In the same month, China's foreign exchange reserves fell by around 51 billion U.S. dollars, despite a 19.5 billion U.S. dollars of trade surplus and 8.13 billion U.S. dollars in foreign direct investment inflows.
Japan, as the second largest holder of U.S. T-bonds, reduced its debt holdings by 8.8 billion U.S. dollars, to 795.5 billion U.S. dollars.
China's State Administration of Foreign Exchange has reiterated that China is a responsible long-term investor and rejected concerns that it would use China's foreign exchange investments as an "atomic weapon" against investment targets.
Earlier this month, Japanese media reported that Beijing has drastically revved up its purchase of Japan's government bonds in2010, making net purchases of 540 billion Japanese yen (6.2 billion U.S. dollars) during the January-April span.
At the same time, China's purchasing of euro-denominated bonds has declined because of the eruption of European debt crisis.